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Nationwide Update: What's Up With HUD?

HUD Nationwide Update

While the government shutdown stalled the U.S. Department of Housing and Urban Development (HUD) from starting 2019 at full speed, the agency resumed business in February with two new policy changes to REAC and the FHA pilot program. These changes will have an immediate effect on HUD-assisted properties and affordable housing.

HUD announced a recent policy change that will drastically reduce the time frame required to provide notice of inspection to rental housing providers that operate HUD-assisted housing or subsidized property developments.

According to the new standard, HUD employees and contract inspectors will provide a notice to participating property owners and operators 14 calendar days prior to a property inspection through the Real Estate Assessment Center (REAC). If a property owner or operator refuses the REAC inspection, a score of zero will be recorded. However, if the property is successfully inspected within 7 calendar days after the initial declined visit, the resulting score will be recorded.

While we understand owners and operators take great care to prepare for REAC inspections on an ongoing basis, HUD says this change will encourage program participants to maintain their properties year-round, instead of short-term fixes to pass a specific inspection. This new policy will take place 30 days after the posted notice.

In addition to the REAC change, HUD will be hosting listening sessions across the United States to collect input from the public and private HUD partners about a potential pilot program that will bring a new approach to inspections of HUD-assisted properties. NAA highly encourages owners and operators to participate in HUD’s listening sessions to ensure the industry’s voice is heard. The first round of listening sessions is scheduled for the following locations: Philadelphia, Fort Worth, Atlanta, Detroit, and Seattle.

Of equal importance, Secretary Ben Carson also announced in February that the Federal Housing Administration (FHA) is expanding its pilot program to accelerate the financing of Low-Income Housing Tax Credit (LIHTC) projects. In the expansion, the FHA program will include new construction and substantial rehabilitation under Section 221(d)(4) and Section 220 programs. The program extension will eliminate unnecessary reviews by establishing an effective process for low-risk LIHTC transactions. Currently, the processing time for a LIHTC project is approximately around 90 days; however, under the revised program, processing times will be accelerated to 60 days for the Standard Approval Process and 30 days for the Expedited Approval Process.

The adjustments to the FHA pilot program encourage the production and preservation of more affordable multifamily housing communities. This is a positive step forward for the industry as 30 percent of the FHA’s multifamily volume is currently comprised of LIHTC transactions. Moreover, these changes help the apartment industry move closer to the goals set out in NAA’s Vision 2030 plan for developing 4.6 million new units of apartment housing by 2030.

In addition to the changes that HUD is pursuing on REAC and the FHA pilot program, the Department continues its work to streamline and reform the Section 8 Housing Choice Voucher (HCV) Program. At the 2019 NAA Advocate Conference, Section 8 Reform was one of industry’s top priorities for Lobby Day. To that end, NAA continues to work with its affiliates and members to oppose efforts to make voucher acceptance mandatory and engage HUD to offer solutions that would incentivize owners and operators in the private market to participate voluntarily. During Advocate, NAA along with a diverse group of members provided HUD with industry input at a pivotal time when the Department is finalizing its legislative and regulatory priorities related to the HCV Program. Examples of potential improvements include establishing a uniform set of processes that PHAs must follow; incentivizing rental housing provider participation with risk mitigation funding and signing bonuses for new participants; and providing prequalifying inspections to allow owners and operators to turn apartments more quickly for new residents.

If you have any questions or concerns regarding these recent developments, please contact Jodie Applewhite, Manager of Public Policy.